This is a proceeding to review an order of the referee directing that the sum of $265.65 should be paid in full to one John S. Petterson in advance of dividends to other creditors. The referee found, as appears from his certificate, that Petterson was employed by the bankrupt corporation as a collector, and “that as security for the faithful performance of his duty he deposited with said corporation, on the day of his employment, the sum of $500,” all of which was repaid except the sum of $265.65. The referee further finds:

The evidence upon which the referee acted is not before the court, and the petition for review was argued upon the assumption that the certificate of the referee contained a full and correct statement of the facts. It will be observed that the referee does not find, specifically, that the bankrupt used $265.65 of Petterson’s deposit to pay for merchandise which went into the general stock of merchandise carried by the bankrupt; nor is there any finding that such merchandise, or its proceeds, came into the hands of the trustee. The deposit, constituting the trust fund, is not, by the findings of the referee, sufficiently traced as part of the assets of the bankrupt estate. The rule applicable in cases like this is thus stated by Gilbert, J., in Spokane County v. National Bank, 68 Fed. 979 , 16 C. C. A. 81 :

In other words, the depositor is not entitled to an equitable lien upon the entire mass of the estate of the bankrupt, but only upon that portion of it into which his deposit can be traced. In the well-considered case of Cavin v. Gleason, 105 N. Y. 257 , 11 N. E. 506 , the court said :

I do not understand that the Supreme Court, in Peters v. Bain, 133 U. S. 670 , 10 Sup. Ct 354, 33 L. Ed. 696 , announced any different rule. Of course, under this rule, it was not incumbent on the depositor, in the present case, to show that the identical merchandise purchased with his money passed into the hands of the trustee. If such merchandise was commingled with the bankrupt’s general stock, and this general stock or the proceeds arising from the sale thereof, whether money, credits, or other property, can be shown to form a part of the assets of the bankrupt estate, the depositor would be entitled to an equitable preference in the distribution of such estate. In the case of Cavin v. Gleason, 105 N. Y. 256 , 11 N. E. 504 , above cited, the court, after stating that “it is the general rule, as well in a court of equity as in a court of law, that in order to follow trust funds and subject them to the operation of the trust they must be identified,” proceeded to say:

The order of the referee is reversed, with directions to find from the evidence already taken, and such additional evidence as may be offered, whether the deposit of Petterson, either in its original or substituted form, is or is not a part of the assets of the bankrupt, under the rule stated in this opinion.